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Commentary

Blockbuster Accused Of Violating Video Privacy Law

Blockbuster has been hit with a new privacy lawsuit alleging that it violates a federal law by keeping detailed records about Web users.

"Blockbuster maintains a virtual digital dossier
on millions of consumers nationwide," Minnesota resident Baseem Missaghi alleges in the lawsuit, filed in federal district court in Minnesota. "These records contain not only its customers' credit
card numbers and billing/contact information, but also a highly detailed account of their video viewing histories and preferences." Missaghi quietly filed the case earlier this month.

Netflix
is also facing a class-action suit alleging that its record-keeping violates the Video Privacy Protection Act, a law passed in 1988 after a newspaper in Washington obtained and published the video
rental records of Supreme Court nominee Robert Bork. The statute prohibits movie rental services from disclosing information about the movies people watch without their consent, and also requires
movie rental companies to promptly destroy personally identifiable information.

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This isn't the first time Blockbuster has been sued for allegedly violating the Video Privacy Protection Act.
The company was also hit with a potential class-action in 2008 for participating in Facebook's Beacon program, which told users about their friends' activity at ecommerce sites.

That matter
eventually got rolled up in the Beacon settlement. Before then, however, Blockbuster unsuccessfully argued
that the case should go to arbitration because its contract with users called for disputes to be settled out of court. In 2009, a federal judge rejected Blockbuster's position, ruling that the
company's contract with users was "illusory" because the agreement said the movie rental store could change the terms and conditions at any time.

Since then, however, the U.S. Supreme Court
made it easier for companies to enforce arbitration clauses. That court ruled in April that AT&T was entitled to enforce an arbitration agreement against consumers who tried to bring a class-action
against the company. The consumers had alleged that AT&T advertised discounted cell phones but charged tax on the full price.

It's too early to know whether Blockbuster will be able to get
this latest lawsuit dismissed. Regardless, many people who rent movies probably would find it unsettling if a list of movies they had rented or streamed was made public. Blockbuster and Netflix
undoubtedly believe that the data they glean from users' records is critical, and that the risk of leaks is small. Whether the companies are right about that remains to be seen.